Vow ASA — Investor Presentation 2017

Aug 29, 2017

SCANSHIP HOLDING ASA 1H 2017 - Presentation

29 August 2017

Henrik Badin, CEO Erik Magelssen, CFO

1

Disclaimer

This presentation (the "Presentation") has been produced by Scanship Holding ASA ("Scanship" or the "Company") exclusively for information purposes.

This Presentation includes forward-looking statements regarding Scanship, including projections and expectations, which involve risk and uncertainty. Such statements are included without any guarantee as to their future realization. Although Scanship currently believes that the expectations regarding the Company reflected in such forward-looking statements are based on reasonable assumptions, no assurance can be given that such projections will be fulfilled. Any such forward-looking statement must be considered a long with the knowledge that actual events or results may vary materially from such predictions due to, among other things, political, economic, financial or legal changes in the markets in which Scanship does business, and competitive developments or risks inherent to the Company's business plans. Many of these factors are beyond Scanship's ability to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements. Accordingly, the Company does not accept any responsibility for the future accuracy of the forward-looking statements expressed in this Presentation or the actual occurrence of the forecasted developments. The Company does not intend, and does not assume any obligation, to update any such forward-looking statements as of any date subsequent to the date hereof.

No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including, without limitation, projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, the Company does not accept any liability whatsoever arising directly or indirectly from the use of this Presentation.

By receiving this Presentation, the recipient acknowledges that he will be solely responsible for its own assessment of the market and the market position of the Company and that he will conduct his own analysis and be solely responsible for forming his own view of the potential future performance of the businesses of the Company. This Presentation must be read in conjunction with the recent financial information, as well as other publicly disclosed information.

Nothing in this Presentation, nor any other information provided to the recipient by the Company or any of its advisers constitutes, or may be relied upon as constituting, investment advice or any financial, tax or legal advice by such persons or anybody else.

2

About the company

• We provide world leading solutions for cleaner oceans
• System portfolio includes wastewater purification, food waste processing, garbage handling and sludge treatment sold separately or bundled as total clean ship solutions
• We have equipped more than 100 cruise ships holding a historical share of a third of this market since 1995
• Forward order backlog includes systems to 25 new cruise ships for deliveries until 2022
• Every second cruise newbuild delivered from 2014 are equipped with our wastewater treatment systems
• We have recently entered the aquaculture market with sludge treatment as part of RAS technology on smolt facilities
• We are developing new technology to convert waste into energy improving environmental impact and reducing cost of operations

Strong financial improvement

• Best half year result since listing in 2014
• Back on growth-track driven by system deliveries to newbuilds
• EBITDA margin reaching acceptable levels and on its way to double digit
• Last years "drop" caused by temporary aggressive competition in cruise newbuild space

All-time high order backlog

Order backlog development

Orderbook does not include the activities within the Aftersales segment

• All-time high backlog at MNOK 360
• Seven total clean ship contract awards for cruise newbuilds during first half year:
• 3 off Virgin Voyages at Fincantieri
• 2 off MSC Meraviglia Plus at STX France
• 2 off Hapag Lloyd Cruises at Vard (Fincantieri)
• Two sludge treatment contract awards in Aquaculture during first half year:
• Salangfisk & Sjøtroll/Lerøy
• One foodwaste contract award with STX France for Aircraft Carrier in June

Increased revenues within Cruise newbuilds

Business area: Projects

• Revenue growth in Projects with system delivery to cruise newbuilds
• Aquaculture revenue was ~10% in the period
• Without AWP (wastewater treatment) retrofit revenue during first half year as market is "slow" (temporary shift of investments towards Exhaust Gas Cleaning)
• Aftersales expected to increase steadily as installed base of Scanship systems is increasing (+20% next two years)
• Seasonal effects are present in Aftersales as more purchases are being made in second half of the year
• Last year's restructuring within Aftersales has improved net margins in operations significantly, however some short term effects has reduced revenues in service and repair jobs
• Total sales volume in Aftersales is increased with higher sale of spare parts and chemicals

Business area: Aftersales

6

					Improved efficiency in execution
--	--	--	--	--	----------------------------------

• Significant stronger EBITDA from improved efficiency in operations and higher revenues
• Reduced operating expenses from restructuring during second half of last year
• Non-recurring costs of MNOK 1.4 related to the strategic review process concluded in May 2017 reduced EBITDA down to 8.9% from 10.2%

	Unaudited	Unaudited	Audited
(MNOK)	1H 17	1H 16	2016
Total operating revenue	117.2	84.8	171.6
Cost of goods sold	-82.7	-58.5	-123.6
Employee expenses	-13.3	-14.4	-28.1
Other operating expenses	-9.4	-11.4	-22.5
EBITDA before non-recurring items	11.9	0.5	-2.6
EBITDA margin before non-recurring items	10.2 %	0.6 %	-1.5 %
Non-recurring items	-1.4	0.0	-0.8
EBITDA	10.5	0.5	-3.4
EBITDA margin	8.9 %	0.6 %	-2.0 %
Depreciation and amortisation	-1.2	-1.1	-2.4
Operating result (EBIT)	9.2	-0.6	-5.8
Net Financial items	-1.1	0.8	0.7
Result before tax	8.2	0.3	-5.1

Profit & Loss statement

Balance sheet
	Unaudited	Unaudited	Audited
(MNOK)	30.06.17	30.06.16	31.12.16
ASSETS:
Total non-current assets	33.8	31.5	32.6
Current assets:
Inventories	4.9	7.1	3.5
Trade receivables	66.9	53.1	57.8
Contracts in progress	25.0	29.0	14.2
Other Receivables	16.5	15.5	13.9
Cash and cash equivalents	2.8	2.0	3.6
Total current assets	116.1	106.8	93.0
Total assets	149.9	138.3	125.6
EQUITY AND LIABILITIES
Total equity	51.1	50.1	45.4
Total non-current liabilities	6.0	5.1	4.1
Current liabilities
Trade creditors	27.2	28.9	31.5
Contract accruals	17.6	13.5	8.2
Financial instruments	3.5	4.9	1.8
Income tax payable	0.9	0.3	0.5
Bank overdraft	31.7	24.1	23.9
Other Current liabilities	11.9	11.3	10.2
Total Current Liabilities	92.8	83.1	76.1
Total liabilities	98.8	88.2	80.2
Total equity and liabilities	149.9	138.3	125.6

Statement of financial position

• The non-current assets per 30.06.17 includes:
• MNOK 3.5 in fixed assets
• MNOK 30.3 in intangible assets, of which the development costs for the MAP system is the most significant
• Payment of MNOK 19 (Euro 2.0 mill) received from one customer just subsequent to Q2 (on 5 July) related to overdue trade receivable as per 30.06.17
• Non-current liabilities per 30.06.17 primarily consist of deferred tax liability of MNOK 4.7
• Equity ratio is 34 % per 30.06.17

Cash flow in current operations

Cash flow statement

	Unaudited	Unaudited	Audited
(MNOK)	1H 17	1H 16	2016
Result before tax	8.2	0.3	-5.1
Net cash flow from operating activities	-6.1	-10.3	-5.8
Net cash flow from investing activities	-2.5	-5.1	-7.4
Net cash flow from financing activities	7.8	-2.0	-2.8
Net change in cash and cash equivalents	-0.8	-17.4	-16.0
Cash and cash equivalents at start of period	3.6	19.5	19.5
Cash and cash equivalents at end of period	2.8	2.0	3.6

• Cashflow from operations in 1H 2017 improved to MNOK 12.9 when including payment received early July on overdue receivable per 30.06.17
• Compared to the reported EBITDA of MNOK 10.5 in 1H 2017, the MNOK 12.9 adjusted level gives a positive EBITDA to operating cash flow conversion in 1H 2017
• Long-term outstanding receivable on German VAT (MNOK 5) also collected in July 2017
• Positive cash flow from financing activities is the increase in the bank overdraft, including the increased limit

Outlook Innovations & Markets

Game changing technology being developed

Scanship MAP test facility in Norway

• We are developing a game changing technology for waste handling representing future growth opportunity not only in cruise but several other markets
• Our innovation is based on microwave assisted pyrolysis, hence the name Scanship MAP
• The solution converts garbage, foodwaste and sludge from wastewater into energy that will significantly reduce aboard fuel consumption (HFO and MGO) and eliminate discharge to sea
• A full scale Scanship MAP test facility is up and running in Norway to complete development and commercialization
• There is strong interest in MAP, and several of largest shipowners and yards is currently evaluating for future newbuilds and retrofits

Cruise industry is growing with more newbuilds

• A steady ~ 7% growth of passenger drives the market for newbuilds and ship upgrades
• Industry orderbook comprises 87 vessels with delivery until 2026
• More ships are being built to meet supply demand in Asia Pacific region
• There is an increased demand for high-end waste and wastewater management systems to improve overall environmental sustainability in industry
• Annual forward newbuild market for clean ship systems is expected to reach ~NOK 400 in which Scanship in recent years has increased market share
• Future deployment on waste to energy systems will increase market size for clean tech solutions

Huge untapped potential for retrofits in Cruise

• IMO Marpol has enforced new discharge standard for wastewater in the Baltic sea (2021) referred to as the Helcom standard
• Scanship is the only supplier to date having wastewater treatment systems in Helcom compliant operations on large cruise ships
• Total market for wastewater treatment on existing world cruise fleet is estimated at Billion NOK ~ 4 - 5
• Implementation of Helcom standards is expected to be adopted as industry standard for existing ships as already adopted on newbuilds from 2012
• We have delivered 26 turn-key AWP retrofits as market leader
• Scanship's MAP technology with attractive ROI and high environmental impact will be applicable for future retrofits on all existing cruise ships

CAPEX in new smolt facilities in Norway

Number of licensed production units in Norway

Smolt facilities (2016): 220 Salmon Fishfarms (2016): 990 Recirculating Aquaculture Systems (RAS) on smolt (2015): 70

Growth opportunities in Aquaculture

• We are positioning in the Norwegian aquaculture market, with orders to some of the largest smolt facility newbuilds to date; Steinsvik, Salangfisk and Sjøtroll
• Aquaculture market for water treatment and sludge handling is growing as the industry is moving towards a more environmental sustainable production
• Long term industry growth targets will require an annual increase of production between 7 – 10% (3-5 million tons by 2030)
• Growth in water treatment and sludge handling will in addition be driven by large investments in post smolt production, upgrades of existing facilities, and how fast fishfaming will move onshore or towards seabased closed cage systems to reduce mortality (down from ~ 20% mortality level)
• Sludge treatment on fishfarms (full grow out) is expected to require ~20 times more capacity compared to smolt facilities

Key takeaways

Scanship wastewater treatment system on RCCL Quantum of the Seas

• Best half year results since listing in 2014, EBITDA margin reaching acceptable levels and on its way to double digit
• Improved efficiency in execution has reduced other operating expenses and employee costs while revenues have increased by 38%
• Order backlog at all time high at MNOK 360
• Strong interest from world leading players for our game changing MAP technology

Thank you for your attention!

Investor Relations Contact:

Erik Magelssen, CFO Mobile: + 47 92 88 87 28 E-mail: erik.magelssen@scanship.no

Henrik Badin, CEO Mobile: + 47 90 78 98 25 E-mail: henrik.badin@scanship.no

Scanship Holding ASA

Lysaker Torg 12 P.O. Box 465 1327 Lysaker Norway

www.scanship.no